CDEMA Symposium to Commemorate the 10th Anniversary of Hurricane Ivan Exploring Response and Recovery, Embracing Resilience

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1 CDEMA Symposium to Commemorate the 10th Anniversary of Hurricane Ivan Exploring Response and Recovery, Embracing Resilience Radisson Grenada Beach Resort, Grand Anse, Grenada 1st 3rd December, 2014

2 CCRIF SPC INITIATIVE- Climate Risk Adaptation and Insurance in the Caribbean Livelihood Protection Policy: Towards Strengthening Resiliency in Caribbean States Presented by Dr. Akiba A. Reid 2 December 2014

3 OUTLINE CCRIF SPC Overview CCRIF Business Model Understanding Microinsurance Climate Risk Adaptation and Insurance in the Caribbean Project Defining Parametric Insurance Livelihood Protection Policy

4 ABOUT CCRIF SPC (CCRIF) Designed to limit the financial impact of catastrophic hurricanes and earthquakes. Hurricane Ivan s devastating impacts on the Caribbean ten years ago ultimately led to the formation of CCRIF. In 2014, the facility was restructured into a segregated portfolio company (SPC) to facilitate expansion into new products and geographic areas.

5 CCRIF S BUSINESS MODEL

6 CCRIF AND RISK TRANSFER Insurance Catastrophe insurance for governments Risk pooling Pooling risks of member governments Insurance-linked securities Catastrophe bonds Micro-insurance Climate Risk Adaptation and Insurance in the Caribbean Project

7 MICROINSURANCE On a daily basis, the poor around the world face a multitude of risks that threaten to derail any progress they have made to work their way out of poverty. The increasing catastrophic trends have left the low income people bare, and focus has changed from property and the high income people, to every one including the low income sector. The protection of low-income people against specific perils in exchange for regular monetary payments (premiums) proportionate to the likelihood and cost of the risk involved seeks to provide a suitable solution for managing these risks.

8 CLIMATE RISK ADAPTATION AND INSURANCE IN THE CARIBBEAN A consortium of organizations tasked to expand the range of adaptation options related to disaster risk reduction & microinsurance for vulnerable people in the Caribbean. Implemented by Munich Climate Insurance Initiative (MCII), CCRIF, MicroEnsure and MunichRe. Funded by German Federal Ministry for the Environment (BMU), Nature Conservation and Nuclear Safety. Two products : Livelihood Protection Policy (LPP) and Loan Portfolio Cover (LPC).

9 LIVELIHOOD PROTECTION POLICY (LPP) The LPP is an innovative new product It will provide insurance coverage for vulnerable persons such as farmers against extreme weather 9

10 L.P.P CONT D The LPP helps protect the livelihoods of vulnerable low-income individuals by providing swift cash payouts following extreme weather events - high winds and heavy rainfall Provided through local insurance companies and financial institutions. Available in Saint Lucia, Jamaica, Grenada. Parametric insurance policies.

11 WHAT IS PARAMETRIC INSURANCE? An insurance contract where the ultimate payment or contract settlement is determined by a weather/geological observation or index, such as average temperature or rainfall over a given period or the intensity of an earthquake or wind storm. Parametric instruments use a model to calculate the payout of the insurance policy. This payout model aims to closely mirror the actual damage on the ground and enables a much more rapid payment as no loss adjusters are required after the event to assess the actual damage. Parametric insurance payouts are not based on individual loss adjustments, but are determined according to the measurement of a highly correlated index. Therefore, there is the potential for a mismatch between parametric insurance claims settlement and the actual losses of the insured. The possibility that a payout may be higher/lower than actual losses is basis risk.

12 LPP PRODUCT OVERVIEW The LPP allows individuals to buy only the cover they can afford(in slices), and at any time of the year. In Jamaica, the minimum cover which can be purchased is equivalent to US$500 sum insured per slice while in Saint Lucia and Grenada the minimum cover is EC$1,000/slice. Individuals in each country can purchase up to 10 slices. The annual premium varies from country to country. The policy is designed to cover the entire territory of each of the three targeted countries. Each target country is divided into administrative zones. This enables people residing in any area in each island to sign on to the product and be localised to the specific subdivision where their risk exposure is located.

13 LPP PRODUCT OVERVIEW CONT D Livelihood Protection Policy

14 LPP PERFORMANCE Policies sold to date 76 Saint Lucia 82 Jamaica Insurance companies involved in this programme Jamaica International Insurance Company (Jamaica) Trans-nemwil (Grenada) EC Global (Saint Lucia) EC Global made a payout to their clients in early January 2014 after Saint Lucia was impacted by heavy rainfall which triggered policies at the end of December 2013

15 CONCLUSION Hurricane Ivan s devastating impacts on the Caribbean ten years ago ultimately led to the formation of CCRIF. CCRIF s catastrophe insurance is purchased at the national level by countries and are clear examples of proactive planning for disaster risk management as well as climate adaptation. Resilient investment and recovery at the community level is also critical to CCRIF s value proposition. Livelihood Protection Policy complements the catastrophe insurance purchased by governments. Thus, a more resilient region requires product access in all CCRIF member countries. CCRIF will continue to work with countries to advance collaborative approaches to reduce vulnerabilities to hazards, enhance debt and financial sustainability and reduce poverty.

16 Contact us at ccrif_pr